Kent - Marketing Factors
Excerpts from Kent Review
Prepared by Kent Brand Group
December 7, 1981
1) The most recurrent distribution problems for Kent have involved the transit trade, which by its very existence is subject to uneven order patterns. However, Brown & Williamson International Tobacco inherited a business in which Lorillard had virtually ignored transit channels for the months immediately prior to the assets sale in 1977. The effects of that lapse endured, and momentum was lost, primarily to Marlboro. Marlboro now clearly dominates these channels. Since transit sales are directly influenced by demand, the number one brand, generally Marlboro, always has the highest priority for the transiteer. Lately, Kent has suffered from its lower priority among transiteers.
2) Parallel shipments have created another distribution problem for Kent. Especially in Paraguay in 1981, parallel shipments have resulted in confusion among consumers and loss of support among official distributors of the brand.
1) It is obvious that a brand second in demand in a transit market is at a disadvantage when its influence is compared to that which a strong market leader can exert over transiteers.
2) Parallel shipments occur when a set of circumstances exist which will allow an importer in one market to sell his goods more profitably in another market. 1901 was an exceptional year because the unprecedented appreciation of the U. S. dollar against most currencies encouraged stockpiling of dollar denominated Kent product. Distributors sensed a continued appreciation of the dollar, took delivery of product and held stocks as the dollar appreciated further. Product was then offered at a price which was under the figure quoted directly by Brown & Williamson International Tobacco. Our weak position in Paraguay this year is a direct result of parallel shipments.
1) Since transit sales are governed by in-market demand, simply selling product into the appropriate channels will have no effect on end user sales. Brown & Williamson International Tobacco should institute a program to monitor the transit pipeline in order to avoid short-sighted overstock situations.
2) Brown & Williamson International Tobacco should closely monitor those markets where parallel shipments are suspected. If the shipments provoke a negative market situation, action should be initiated to (1) remove the price advantage to buyers of parallel shipped goods and/or (2) isolate the source of parallel shipments and ration orders to that source until the parallel shipments are curtailed or eliminated.